In China, oatly milk, with its coffee “out of the circle”, is trying to replicate this successful experience in the tea track.
Xiaoshidai noted that at the recently held first quarter performance meeting, oatly CEO Toni Petersson revealed that the company has launched a number of new products to the Chinese market in the past few weeks, including a “tea master oat milk” specially created for high-quality tea.
In addition, Petersson also talked about the impact of the epidemic on China’s business and coping strategies, growth opportunities in China and so on. Let’s have a look.
According to oatly’s first quarterly report of 2022, its revenue in the current quarter was US $166.2 million (about RMB 1.111 billion), a year-on-year increase of 18.6%; The gross profit was US $15.8 million (about 106 million yuan), compared with us $41.9 million in the same period last year.
The company said the revenue growth was mainly due to the release of additional supply from new and existing factories to meet the growing global demand for its products. Petersson said in the financial report that the first quarter revenue exceeded the company’s expectations.
At the same time, oatly also pointed out that revenue growth was affected by a number of adverse factors, including lower than expected output and lower than expected sales in Asia, “mainly in China, the epidemic led to the closure of catering service outlets”. During the period, the revenue of oatly Asia was US $28.7 million (about 192 million yuan), a year-on-year increase of 15.3%.
“In China, our team is going through a very difficult environment, especially considering that the recent closure has seriously affected our business.” Petersson said at the performance meeting that among the Chinese retail and catering service stores settled by oatly, the number of stores closed due to closure in the first quarter of this year exceeded 17000.
Although he did not mention the proportion of this figure in Chinese outlets, xiaoshidai noticed that Petersson said that the company had entered more than 21500 retail stores and more than 37000 catering service stores in Asia in the first quarter. Among them, catering services contributed 75% of oatly’s sales in Asia.
Latest data of oatly Asia business
“As the closure still exists, we expect the region to continue to face adverse effects until the situation begins to improve. Including Shanghai, we have a large part of our business in Shanghai.” Petersson said.
At the same time, he also pointed out that as the sealing force became stronger in March, the Chinese team has turned to solve the core problem, “that is, how do we sell when everything is closed”.
According to him, under the closure and control of the epidemic, oatly China team is further promoting the multi-channel growth strategy, and recently launched community group purchase, participated in government procurement and cooperated in o2o ordering. In addition, as the first and second tier cities are greatly affected by the closure, oatly will also focus on expanding distribution in the third and fourth tier cities.
“(China) team has done a good job in the transformation of our business model.” Petersson preached.
Looking forward to 2022, Petersson said that the performance in the second quarter is expected to continue to be affected by the strengthening of epidemic restrictions and closures and the increasing inflationary pressure, but the team has “performed very well” in coping with the dynamic operating environment and maintaining and expanding the share of key markets.
“I believe that the $0.8 billion blockade and the $0.9 billion profit margin in the second quarter of this year will help us to maintain our responsibility for the global operating environment and improve our operating environment. Although we have been cautious about the $0.8 billion blockade and the $0.9 billion profit margin in the second quarter of this year.” Petersson said.
As for the Asian market, Petersson believes that it is still optimistic about the region in the long run, but the risk level has increased in the short term. “Assuming the closure is lifted, we still expect strong growth in the whole year.”.
Toni Petersson, CEO of oatly (information picture)
In addition to addressing short-term challenges, oatly, which regards China as one of the key markets, is also busy “replenishing ammunition” for long-term growth.
In November last year, David Zhang, President of oatly Asia, told xiaoshidai that due to supply chain constraints, the company has mainly built “coffee masters” (Note: it mainly supplies catering end and is used to match coffee preparation) into “1 billion items” in China in the past three years. Petersson revealed at a recent meeting that 80% of the sales in the Asian market came from “coffee masters” in the first quarter of this year.
In fact, since oatly has completed two Asian factories, the oat milk giant is also vigorously promoting product diversification.
For example, in the catering service channel, oatly, which is “deeply bound” with coffee, launched “tea master oat milk” in the first quarter of this year. “We estimate that the market size of boutique tea is twice that of boutique coffee.” Petersson said.
According to its introduction, this new product is a “Master Series” product customized for high-quality tea and catering service channels. Previously, the “tea master” has entered about 5000 shuyishaoxiancao stores. The products jointly launched by the two sides “become one of the best-selling drinks within 10 days, with a sales volume of more than 1 million cups”.
“We are full of confidence in the success of (tea master) so far. We have also received strong interest and orders from other chain brands, and hope to expand this (product) platform in 2022 and beyond.” Petersson said.
New products displayed by oatly at the meeting
In addition, in the retail channel, oatly also launched a more portable 250ml small package of oat milk.
This is also inseparable from oatly’s insight into the milk market. “In China’s milk market, 200 ml to 350 ml portable packaging is the most popular specification, which makes us excited to provide Oatmeal Milk products with similar specifications.” Petersson said.
“In terms of retail strategy, we are still in the early stage.” He said that oatly’s strategy is to prepare for production and expand retail channels with appropriate product specifications. “Small packaging and small combined packaging are things that will be promoted throughout the year”.
So, in order to promote the multi-channel strategy, what production preparations are oatly doing?
According to Peter Bergh, chief operating officer of oatly, at present, the factories in Ma’anshan and Singapore are still in production and will continue to improve production capacity. “Our current expectation is that the Singapore plant will reach a stable state in the third quarter, while the Ma’anshan plant will continue to increase production capacity this year.”
Bergh also revealed that due to the epidemic situation and the limited ability to receive materials in Ma’anshan, oatly will “manage the schedule very carefully to increase production”.
“The (factories) in Ma On Shan and Singapore enable us to launch new products, further enrich our product portfolio and achieve future growth in catering services, retail and e-commerce channels.” Petersson said that with the help of the two factories, oatly will launch more new products and products of different specifications customized for Chinese consumers, retail and e-commerce.
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